DISCOs seek periodical adjustments in consumer-end tariff

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ISLAMABAD: Power distribution companies (DISCOs) including IESCO, FESCO and LESCO has sought from the National Electric Power Regulatory Authority (NEPRA) to approve adjustments in the consumer end tariff pertaining to the financial year (FY) 2016-17 and FY 2017-2018 to maintain their financial viability.

Earlier, the Authority (NEPRA) determined a multi-year tariff for the Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Lahore Electric Supply Company (LESCO) for the FY 2015-16 to FY 2019-20, and the same was notified by the federal government on March 22, 2018. The notification determined for a mechanism for periodic adjustment in certain components of the tariff. Accordingly, IESCO and FESCO have filled their requests for adjustment on account of Power Purchase Price (PPP), indexation and distribution margin components and prior period adjustments, in line with the notified tariff. LESCO, however, filed its request to the extent of adjustment on account of PPP only.

Since the impact of any such adjustment is to be passed on to the consumer, therefore, the Authority considered it just and appropriate to conduct hearing in the matter, said NEPRA in a notice issued to the stakeholders.

The NEPRA, in a notice, has also asked the stakeholders to submit written comments or objection as permissible under the law and attend NEPRA’s hearing scheduled in NEPRA headquarter, Islamabad on July 31, 2018.

LESCO in its application for adjustment of first and second quarter for FY 2017-18 said in furtherance of consumer end current notified tariff vide S.R.O No. 570, dated June 10, 2015, LESCO’s adjustment for the first and second quarter of FY 2017-18 (July-2017 to Dec-2018) pertaining to the capacity and transmission charges invoiced by Central Power Purchasing Agency (CPPA) to LESCO as per the notified transfer pricing mechanism, the impact of T&D losses on the component of PPP as per notified tariff, and adjustment of variable O&M as per actual being passed on to LESCO. LESCO has sought total Rs6,573 million under PPP quarterly adjustment for FY 2017-18. And, for the first quarter (July to Sep), LESCO sought Rs3,129 million and Rs3,444 million for the second quarter (Oct-Dec).

Similarly, LESCO claimed a total Rs3,129 million for variable O&M, UOSC, CPP, losses and excess units purchased from July 2017 to September 2017. More, LESCO claimed the total impact of Rs4,197 million for the period July 2017 to September 2017. More, LESCO claim for above said variable stands at Rs3, 444 million for October 2017 to December 2017.

FESCO, in its plea to NEPRA, has asked for an adjustment of tariff component for FY 2016-17 and 2017-18 under multi-year tariff regime. The FESCO asked to adjust/index tariff component of PPP including T&D losses, operation and maintenance (O&M), depreciation of expense, return on rate base, other income and prior year adjustment (PYA).

It is relevant to mention that NEPRA has already directed FESCO to file adjustment data for FY 2016-17 and 2017-18 against the MYT 2015-16 to 2019-20. The tariff of FESCO for FY 2015-16 re-determined by NEPRA, dated September 18, 2017, and the subsequent periodical adjustment on account of PPP including the impact of T&D losses on FCA and prior year adjustment pertaining to the FY 2016-17 is still not notified. On the other hand, FESCO required recovery of its cost of service at the current market prices to maintain its financial viability.

Since the tariff of FESCO for FY 2015-16 re-determined by NEPRA, dated September 18, 2017 and the subsequent periodical adjustment on account of PPP (power purchase price) including impact of T&D losses on FCA and prior year adjustment pertaining the FY 016-17 is still not notified, therefore the reference tariff components of FY 2015-16 cannot be used for adjustment/indexation. At the same time, FESCO requires recovery of its cost of service at the current market prices to maintain financial viability, said FESCO in its petition seeking an adjustment in the consumer end tariff.

Asking the Authority (NEPRA) to allow the tariff adjustment for the FY 2016-17 and 2017-18, FESCO has also claimed Rs229 million for FY 2017-18 (July-Dec 2017) on account of PPP adjustments. FESCO also said that actual O&M cost for FY 2016-17 was Rs1,3848 million as per audited financial statements ended June 30, 2017, and actual/estimated O&M cost of Rs15,909 million for FY 017-18.

Also, FESCO projected Rs1.23 million under O&M expenses for 2017-18. FESCO said actual depreciation expenses for FY 2016-17 were Rs2,282 million and as per audited financial statements ended June 30, 2017 and actual/estimated depreciation expenses were of Rs2, 682 million for FY 2017-18. Again, an amount of Rs221 million has been under assessed. The actual Return on Rate Base (RORB) of Rs2,787 million for FY 2016-17 as per the audited financial statements ended June 30, 2017, and actual/estimated RORB is of Rs3, 341 million for FY 2017-18.

Likewise, the actual other income of Rs3, 421 million is for FY 2016-17 as per audited financial statement ended June 30, ,2017 and actual/estimated other income is of Rs2, 53 million is for FY 017-18 excluding the impact of late payment surcharge. Currently, the LPS is remitted to CPPA-G as per tariff determination of FY 2014-15 and instructions of Government of Pakistan. More, an amount of Rs221 million has been under assessed in the PYA of FY 2015-16 and 2016-17 as well.

IESCO, in its request for adjustment of tariff components for FY 2016-17 and 2017-18 under multi year tariff regime, said the tariff of IESCO for FY 2015-16 re-determined by NEPRA dated September 18, 2017, and the subsequent periodical adjustments on account of PPP including impact of T&D losses on FCA and prior year adjustment pertaining to the FY 2017-18 is still not notified.